Global Economy

The ebbs and flows of global economic conditions, trade and capital flows, thus have substantial implications for the Australian economy, and Australia’s major regional trading partners. Understanding the broad trends, and identifying emerging challenges and opportunities within the global economy, is central to the work of the International Economy Program at the Lowy Institute.

The highly integrated nature of the modern global economy became especially evident during the 2008 global financial crisis. What began as a localised problem within the residential asset-backed securities market in the United States, eventually brought down major financial firms across the Western world, and ultimately pushed the United States and Europe into a deep and prolonged recession. Although global economic growth has recovered somewhat since 2008, it is still much lower than pre-2008 trends, and the hangover from the crisis has manifested itself in the form of high unemployment levels throughout much of the developed and developing world, as well as an increasing level of inequality both within and between countries.

Understanding the economic rise of Asia, and particularly of the growing middle class within Asia, is also crucial to the broader work of the Lowy Institute. Political economy analysis on major players in the region, chiefly China, India and Indonesia, features heavily in the work of the East Asia Program and the International Security Program.

In this episode of COVIDcast, Lowy Institute lead economist Roland Rajah sat down with Adam Tooze to discuss how the Covid-19 economic crisis is evolving and reshaping the world economy. Tooze is Professor of History at Columbia University and the Director of its European Institute. He is also the

Roland Rajah, Lowy Institute lead economist, sits down with Adam Tooze, Professor of History at Columbia University and the Director of its European Institute, to discuss how the COVID-19 economic crisis is evolving and reshaping the world economy

ASEAN rising
Australian businesses in Southeast Asia are showing continued faith in regional economic integration despite the relatively lacklustre cross border political cooperation so far seen in response to the pandemic.
A new survey of Australian-connected businesses on

China’s barley tariffs have thrust the challenges of trade into the headlines with a prominence rarely seen in the popular Australian media. Although a crucial basis of national prosperity, the “trade” side of Australia’s international engagement has seemingly always had a lower profile than

China’s decision to impose heavy tariffs on Australian barley and the alleged connection with Australia’s call for an independent international investigation into the origins of the Covid-19 pandemic has been widely and intensively reported in recent weeks. What is more important now is to

In Episode 12 of COVIDcast, Roland Rajah, Director of the International Economy Program, sat down with Brad Setser, Senior Fellow for International Economics, Council on Foreign Relations, to discuss the upheaval brought about by the pandemic in emerging economies and what this has revealed

Roland Rajah, Director of the International Economy Program, sits down with Brad Setser, Senior Fellow for International Economics, Council on Foreign Relations, to discuss the impact of the pandemic on emerging markets and the role of the US dollar

Retail therapyWhen even the normally unflappable Trade Minister Simon Birmingham bluntly tells business to reduce ties with the country that has underpinned the Australian economy for two decades, a mood shift is afoot. It took some prodding, but Birmingham finally broke cover at the end of his ABC&

Last weekend news broke that the Chinese government was considering imposing large tariffs on Australian barley exports. Now, China-bound exports from four Australian meat processors have been suspended.
Following Australian calls for an independent inquiry into the early handling of Covid-19,

Health v growth
The language of lockdown has certainly undergone a change, from Prime Minister Scott Morrison advocating six months of hibernation only a month ago to now warning the country cannot stay under the doona much longer.
But it is no surprise the government's rhetoric has shifted to

In late 2017, China released its national emissions trading system (ETS) plan, laying out a three-stage transition from regional pilot systems that began in 2013. The national ETS announcement came at a time of intense global interest in China’s climate action, especially given the November 2020

While the Canberra political establishment has been sparring with China’s Foreign Ministry – and with Australian billionaires – much of the corporate elite has begun puzzling how to slipstream China’s post–Covid-19 economic recovery.
Optimists hope that Beijing will summon a massive

In this episode of COVIDcast, Roland Rajah, the Lowy Institute’s Director of the International Economy Program, sat down with Rachel Ziemba, Adjunct Senior Fellow at the Center for a New American Security, and Rodger Shanahan, Research Fellow, West Asia Program, to discuss the economic and

The ramifications from the oil war that has pitted Saudi Arabia against Russia but also dragged in the United States may end up being most significant for Riyadh. To misquote Oscar Wilde, “To lose one war may be regarded as misfortune, to lose both looks like carelessness.”
Having already

Earlier this week, New Zealand moved out of total lockdown into a phase of continuing control on social movement, but with an opening of widespread economic activity. Schools reopened partially. It is estimated that about half a million people returned to work after a stand down of five weeks.

While we were once mesmerised by how goods and services could fly around the global economy at the blink of an eye, we have now seen the downside of globalisation, where a virus emanating from a wild animal market in Wuhan an industrial city in the middle of China could spread in a matter of

On 20 April 20, US oil futures closed in negative territory for the first time, implying that no one was willing to take physical delivery of some barrels of oil. While the unprecedented price moves were exacerbated by technical market operations, including an excessively large exchange traded fund

Big boys time
From media baron Rupert Murdoch to leadership rival Peter Dutton, Malcolm Turnbull’s new memoir* released this week is partly built on his self-assessment that he can size up a bully better than most.
“The one thing I’d learned with bullies is that sucking up to them is

As the Covid-19 pandemic deepens, the need for international cooperation to deal with the twin health and economic crises has been highlighted. While much is made of the failings of the World Health Organization, other international bodies have fared no better. In particular, the G20 – which

“This is a moment of reconstruction – we need to reinvent ourselves, myself included,” declared French President Emmanuel Macron in a televised address last week, during which he extended the country’s partial lockdown until 11 May.
Macron spoke of the need to reach strategic autonomy in

Oil made headlines around the world again today, with US oil prices falling below zero for the first time. So what does it mean?
Three perspectives can help to make sense of the headlines.
First, from an economic perspective it’s quite simple – the supply of oil has outstripped demand and

What impact will coronavirus have on economic globalisation, the force that has so momentously changed our world over the last half century?
An early example is the global trade in medicines and medical products, especially those essential to fighting coronavirus such as face masks, ventilators

Confronted by the coronavirus pandemic as a “black swan” event, most countries have chosen the hard suppression strategy with variably stringent lockdown measures. This is based on modelling that shows a dramatic shortage of intensive care beds and ventilators and other crucial medical equipment

In this episode of COVIDcast, Roland Rajah sat down with the Institute’s Director of Research Alex Oliver to discuss the impact of the coronavirus on the global economy. Roland is Director of the International Economy Program and Lowy’s lead international economist.
One of the key questions

The Morrison government needs to urgently consider how it might best help Indonesia manage the economic risks posed by the Covid-19 pandemic. Indonesia faces a perilous outlook. The government is struggling badly to control the virus. Making matters far worse, Indonesia has also been among

To emerge in the best way possible from the Covid-19 pandemic requires us to understand the nature of the economic crisis. Our slowdown has arisen from deliberately-introduced frictions in human interaction at local, regional and international levels. While people remain able to trade in many kinds

World beating
When the Australian government asserted control over all new foreign investment two weeks ago in response to Covid-19, the move was sugar-coated with the reassurance the country was still open for business.
But with Prime Minister Scott Morrison now declaring his

Of all the people who might have been expected to emerge from the current coronavirus crisis with their reputations enhanced, I don’t think many would have nominated Karl Marx.
And yet when governments around the world are adopting unimaginably radical solutions to address yet another “crisis

For all the drama of collapsing output, demand, and jobs in Australia and many economies around the globe, we should expect that output in most countries will begin to recover once new coronavirus infections peak and head down. It will not be soon, but it will happen.
This is, after all, a

Digital mates
The online summit between the leaders of Singapore and Australia on Monday didn’t get much attention amid a stock market meltdown and tensions within Australia’s newly formed federal-state leadership Cabinet to deal with coronavirus.
The virtual meeting made the best

The Covid-19 outbreak has rapidly gone from a crisis for China to a crisis for the world. The pandemic is desperately crying out for international leadership.
So far that has been sorely missing. An extraordinary (virtual) meeting of G20 leaders, to be held on Thursday, will hopefully begin

The International Monetary Fund is like a priesthood, with long-established beliefs that evolve at a glacial pace. A new managing director presents a rare opportunity for reform. Can Kristalina Georgieva, appointed last October, change the Fund’s doctrinal beliefs?
Writing in the Financial Times

This is the third of a three-part series of articles examining the Democrats’ and America’s place in the world in the lead-up to the US presidential election. The first article can be read here, and the second here.
CPTPP: The trade agreement America loves to hate
The fate of the

China syndrome
Former Trump administration economic adviser Kevin Hassett had a backhanded compliment for Australia amid this week’s financial market turmoil when he described it as a closely watched proxy for the Chinese economy.
Complaining that Chinese data on the recovery from coronavirus

Clayton Christensen’s 1997 book The Innovator’s Dilemma provides a series of compelling examples of companies ignoring or dismissing the disruptive potential of immature technologies until it’s too late, only for their upstart competitors to consign them to the dustbin of

Third turn lucky
It is no surprise that Mahathir Mohamad appears to be savouring a third coming as Malaysia’s prime minister since all three of the country’s broad political groupings appear to need his support to form a government.
But the parallel question hanging over regional diplomacy is

China’s economic growth has fallen to its slowest rate since 1990, and this deceleration looks set to continue unless China implements the kinds of deep reforms behind the successful economic transitions of Japan and Korea&nbsp

The International Energy Agency (IEA) is an intergovernmental organisation focused on ensuring reliable, clean, and affordable energy for its 30 member states. To achieve this aim, member states are required to hold oil stockpiles, allowing states to coordinate a collective response to major

In 2017, Chinese President Xi Jinping delivered a speech to the 19th National Congress of the Chinese Communist Party stating that China now “stands tall and firm in the East”. He added, China’s example “offers a new option for other countries and nations who want to speed up their

After 47 years of a chaotic marriage, and more than three years of debates and negotiations that have cost two prime ministers, the United Kingdom has finally separated from the European Union.
The current conversations on the global consequences of this rupture have largely ignored the Pacific,

Back to the future
One of the unreported but intriguing documents in this year’s release of Australian Cabinet papers is a 1999 review of the value of the Asia Pacific Economic Cooperation (APEC) group.
It is interesting because officials will start meeting in Kuala Lumpur next

For a second there the global economy was off to a slightly better start for 2020. The US and China finally inked an initial “phase one” trade deal that at least promised to pause hostilities for a while. That provided some much-needed respite for a world economy, which last year reached its

“India is not going to be a bastion of Western liberalism”, declared Stephen Harper, the former Prime Minister of Canada, at the inaugural session of the Raisina Dialogue, hosted by the Observer Research Foundation in New Delhi. “Although it’s a democracy”, Harper continued, “India has

US President Donald Trump was quite right when he declared the 15 January US­–China “Stage One” agreement an “unbelievable deal” for the United States. Unbelievable it is, though not in a good way – and especially not for Australia.
The deal requires China to import $200 billion more

At the dawn of 2020, the world is waking up on a pillow of uncertainty. The trade war between the United States and China has weakened the global economy, instabilities in the Middle East, Asia, and Latin America intensify public anxiety, and the impact of climate change is becoming ever more

“CHINA’S GDP GROWS AT SLOWEST RATE IN 29 YEARS” bellowed the Financial Times headline last week. Never mind that this rate was still three times faster than OECD growth. The past decade has seen a relentlessly alarmist narrative about China’s slowing growth, yet China is still recording over

After more than a year of tit-for-tat tariffs in the US-China trade war and generalised anxiety about the cost to the world economy, it is remarkable that foreign direct investment into Southeast Asia continued to grow strongly last year, even as global levels flatlined.
Newly-published estimates